Written Representations

ISA Implementation Support Module

Prepared by IAASB Staff October 2010

Overview
Introduction Significant Features of New Standard
Basis for Requiring Written Representations Written Representations as Audit Evidence Source of Written Representations Managements Responsibilities Specific Written Representations Dating of Written Representations
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Introduction
The context for revising ISA 580
Firms practices around the world regarding written representations had become inconsistent Evidence of excessive or undue reliance on written representations from quality control inspections

Question of where primary responsibility for the financial statements lies as a result of a spate of major corporate scandals

Basis for Requiring Written Representations

Old ISA 580 New ISA 580

When other audit evidence cannot reasonably be expected to exist

To support other audit evidence

Written Representations as Audit Evidence

Written representations are audit evidence
They are necessary information used to arrive at audit conclusions

However, on their own they cannot be relied upon for audit evidence to support audit conclusions A written representation defined as a written statement that management provides to the auditor to confirm certain matters or to support other audit evidence
Not to be confused with an external confirmation
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Source of Written Representations

Old ISA 580 New ISA 580

Ordinarily management with primary responsibility for the entity and its financial aspects

Only from management who has responsibility for: (1) Preparing and presenting financial statements; and (2) Is knowledgeable about the relevant matters

Managements Responsibilities
Old ISA 580

Audit evidence that management acknowledges its responsibility for fair presentation of f/s

ISA 210

New ISA 580

Written representations that management has: (1) Fulfilled its responsibility for preparation and, where relevant, fair presentation of f/s; and (2) Provided auditor with all relevant information and access
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Managements Responsibilities
Two further requirements
Written representations that all transactions have been recorded and are reflected in the financial statements to support audit evidence regarding completeness Description of managements responsibilities in written representations to be consistent with description of those responsibilities in agreed terms of engagement

No requirement for written representation regarding fulfillment of managements responsibility regarding internal control
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Managements Responsibilities
Audit evidence about completeness cannot be obtained when:
Management fails or refuses to provide the written representations regarding fulfillment of its responsibilities There is sufficient doubt about managements integrity such that the written representations are not reliable

Judgment about whether management has fulfilled its responsibilities cannot be formed on basis of other audit evidence in these circumstances

Disclaimer of opinion required in such a case

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Specific Written Representations

ISA 580: Overarching basic principles on written representations

Specific written representations required by other ISAs

Specific written representations auditor believes are necessary

To support other audit evidence regarding specific aspects of f/s

To support other audit evidence regarding specific assertions

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Dating of Written Representations

Date written representations as near as practicable to, but not after, date of audit report
Written representations are necessary audit evidence without which audit opinion cannot be expressed

Written representations should cover all financial statements and period(s) referred to in audit report
Important for management to reaffirm that written representations for prior periods are still appropriate Requirement applies even if current management were not present during all periods referred in audit report
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Note
This set of support slides does not amend or override the ISAs, the texts of which alone are authoritative. Reading the slides is not a substitute for reading the ISAs. The slides are not meant to be exhaustive and reference to the ISAs themselves should always be made. In conducting an audit in accordance with ISAs, the auditor is required to comply with all the ISAs that are relevant to the engagement.

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International Federation of Accountants

Copyright October 2010 by the International Federation of Accountants (IFAC). All rights reserved. Permission is granted to make copies of this work provided that such copies are for use in academic classrooms or for personal use and are not sold or disseminated and provided that each copy bears the following credit line: Copyright October 2010 by the International Federation of Accountants (IFAC). All rights reserved. Used with permission of IFAC. Contact permissions@ifac.org for permission to reproduce, store, or transmit this work. Otherwise, written permission from IFAC is required to reproduce, store, or transmit, or to make other similar uses of, this work, except as permitted by law. Contact permissions@ifac.org. ISBN: 978-1-60815-073-1 www.ifac.org